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Cocoa price hits US$10,000 a tonne, prompting chaos for industry and consumers

Amidst a period of soaring inflation where the costs of everyday goods are climbing, a bitter development is leaving consumers and the chocolate industry in a sticky situation. The price of chocolate is surging to unprecedented heights, hitting a staggering US$10,000 per metric tonne in New York's cocoa futures market. This surge, marking a record-high, paints a stark picture as the price has doubled within a year, even outstripping the growth seen in the stock market favorite, Nvidia.

The surge in cocoa prices is attributed to a multitude of factors, primarily stemming from supply constraints in West Africa, the hub of global cocoa production. These constraints, including crop failures, aging plantations, and diseases, have led to the most significant supply deficit in over sixty years. Consequently, the world is facing its third consecutive year of supply shortfall, triggering a frantic scramble among buyers and sellers to secure their share of the cocoa supply.

Both Côte d'Ivoire and Ghana, major cocoa producers globally, are grappling with challenges. Despite being key players in cocoa production, both countries face difficulties due to government-imposed price regulations, which hinder farmers' ability to invest in modernizing their operations. For instance, in Côte d'Ivoire, farmers receive only a fraction of the price at which New York futures are trading, making it challenging for them to improve their productivity or quality.

Industry giants like Nestle, Mondelez International Inc., and Barry Callebaut AG are adapting to this inflationary pressure through various means, including forward-buying cocoa supplies and adjusting prices. However, these adjustments haven't shielded them from the financial impact, as evidenced by stock valuation pressures and downgrades in ratings, such as Hershey Co. being downgraded to neutral by BNP Paribas Exane.

For consumers, the repercussions are evident as prices of chocolate products have surged by as much as 30 percent this year alone. With no relief in sight, consumers may face further price hikes, potentially impacting occasions like Mother's Day, as hinted by experts like Sylvain Charlebois from Dalhousie University.

The current cocoa price surge underscores the vulnerability of global supply chains to disruptions and highlights the challenges faced by both producers and consumers in navigating volatile commodity markets. As industry players and consumers brace for further uncertainties, the sweet pleasure of chocolate may come at a bitter cost in the foreseeable future.



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